36–41
Federal Reserve Banks
Securities
$240
Reserves of Commercial Banks
$72
Loans to Commercial Banks
2
Treasury Deposits
30
Federal Reserve Notes
140
Refer to the given balance sheets. If the reserve ratio is 25 percent, the maximum money–
creating potential of the commercial banking system is
83.
Consolidated Balance Sheet:
Commercial Banking System
Assets
Liabilities & Net Worth
Reserves
$72
Checkable Deposits
$240
Securities
110
Loans From Federal Reserve Banks
2
Loans
60
Consolidated Balance Sheet:
Federal Reserve Banks
Securities
$240
Reserves of Commercial Banks
$72
Loans to Commercial Banks
2
Treasury Deposits
30
Federal Reserve Notes
140
Refer to the given balance sheets and assume the reserve ratio is 25 percent. Suppose the
Federal Reserve Banks buy $2 in securities from the
public, which deposits this amount
into checking accounts. As a result of these transactions, the supply of money will
36–42
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written consent of McGraw-Hill Education.
A.
be unaffected, but the money-creating potential of the commercial banking system will
increase by $6.
B.
directly decrease by $2, and the money-creating potential of the commercial banking
system will be unaffected.
C.
directly increase by $8, and the money-creating potential of the commercial banking
system will increase by an additional $32.
D.
directly increase by $2, and the money-creating potential of the commercial banking
system will increase by an additional $6.
84.
Consolidated Balance Sheet:
Commercial Banking System
Assets
Liabilities & Net Worth
Reserves
$72
Checkable Deposits
$240
Securities
110
Loans From Federal Reserve Banks
2
Loans
60
Consolidated Balance Sheet:
Federal Reserve Banks
Securities
$240
Reserves of Commercial Banks
$72
Loans to Commercial Banks
2
Treasury Deposits
30
Federal Reserve Notes
140
Refer to the given balance sheets and assume the reserve ratio is 25 percent. Suppose the
Federal Reserve Banks sell $2 in securities directly to
the commercial banks. As a result of
this transaction, the supply of money
36–43
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written consent of McGraw-Hill Education.
C.
will directly increase by $2, and the money-creating potential of the commercial banking
system will decrease by an additional $8.
D.
will directly increase by $2, and the money-creating potential of the commercial banking
system will increase by an additional $8.
85.
The Federal Reserve System regulates the money supply primarily by
86.
Which of the following is correct? When the Federal Reserve buys government
securities from the public, the money supply
36–44
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written consent of McGraw-Hill Education.
Test Bank: I
Topic: Tools of Monetary Policy
87.
Which of the following will happen when the Federal Reserve buys bonds from the
public in the open market and the amount of cash held by the
public does not change?
88.
Answer the question on the assumption that the legal reserve ratio is 20 percent. Suppose
that the Fed sells $500 of government securities to
commercial banks (paid for out of
commercial bank reserves) and buys $500 of securities from individuals, who deposit the
cash in checking
accounts.
As a result of the given transactions, reserves in the banking system will
89.
Answer the question on the assumption that the legal reserve ratio is 20 percent. Suppose
that the Fed sells $500 of government securities to
commercial banks (paid for out of
commercial bank reserves) and buys $500 of securities from individuals, who deposit the
cash in checking
accounts.
As a result of the given transactions, excess reserves in the banking system will
90.
Answer the question on the assumption that the legal reserve ratio is 20 percent. Suppose
that the Fed sells $500 of government securities to
commercial banks (paid for out of
commercial bank reserves) and buys $500 of securities from individuals, who deposit the
cash in checking
accounts.
As a result of the given transactions, the supply of money in the economy will
91.
Open-market operations change
36–46
92.
Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement
is 10 percent. All figures
are in billions.
Assets
Liabilities & Net Worth
Reserves
$60
Checkable Deposits
$600
Securities
140
Stock Shares
260
Loans
260
Property
400
The commercial banking system has excess reserves of
93.
Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement
is 10 percent. All figures
are in billions.
Assets
Liabilities & Net Worth
Reserves
$60
Checkable Deposits
$600
Securities
140
Stock Shares
260
Loans
260
Property
400
The monetary multiplier for the commercial banking system is
94.
Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement
is 10 percent. All figures
are in billions.
Assets
Liabilities & Net Worth
Reserves
$60
Checkable Deposits
$600
Securities
140
Stock Shares
260
Loans
260
Property
400
Suppose the Fed sold $10 billion of U.S. securities to the banks. This would
95.
Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement
is 10 percent. All figures
are in billions.
Assets
Liabilities & Net Worth
Reserves
$60
Checkable Deposits
$600
Securities
140
Stock Shares
260
Loans
260
Property
400
Suppose the Fed bought $20 billion of U.S. securities from the banks. This would
36–49
96.
Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement
is 10 percent. All figures
are in billions.
Assets
Liabilities & Net Worth
Reserves
$60
Checkable Deposits
$600
Securities
140
Stock Shares
260
Loans
260
Property
400
Suppose the Fed wants to increase the money supply by $400 billion to drive down interest
rates and stimulate the economy. Assuming that the
money multiplier is operating to full
effect, to accomplish the desired increase, the Fed could
97.
Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement
is 10 percent. All figures
are in billions.
Assets
Liabilities & Net Worth
Reserves
$60
Checkable Deposits
$600
Securities
140
Stock Shares
260
Loans
260
Property
400
Suppose the Fed wants to reduce the money supply by $400 billion to drive up interest rates
and dampen inflation. Assuming that the money
multiplier is operating to full effect, to
accomplish the desired reduction, the Fed could
98.
If the Fed were to reduce the legal reserve ratio, we would expect
99.
An increase in the legal reserve ratio
36–51
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written consent of McGraw-Hill Education.
Difficulty: 01 Easy
Learning Objective: 36-03 List and explain the goals and tools of monetary policy.
Test Bank: I
Topic: Tools of Monetary Policy
100.
When the reserve requirement is increased,
101.
Assume that the commercial banking system has checkable deposits of $10 billion and
excess reserves of $1 billion at a time when the reserve
requirement is 20 percent. If the
reserve requirement is now raised to 30 percent, the banking system then has
102.
When the required reserve ratio is increased, the excess reserves of member banks are
103.
When the required reserve ratio is decreased, the excess reserves of member banks are
104.
A decrease in the reserve ratio increases the
105.
Which of the monetary policy tools can alter both the level of excess reserves and the
money multiplier?
36–53
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written consent of McGraw-Hill Education.
B.
the reserve ratio
C.
the discount rate
D.
the federal funds rate
106.
Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement
is 20 percent. All figures
are in billions.
Assets
Liabilities & Net Worth
Reserves
$200
Checkable Deposits
$1,000
Securities
300
Stock Shares
400
Loans
500
Property
400
The commercial banking system has excess reserves of
107.
Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement
is 20 percent. All figures
are in billions.
Assets
Liabilities & Net Worth
Reserves
$200
Checkable Deposits
$1,000
Securities
300
Stock Shares
400
Loans
500
Property
400
The monetary multiplier for the commercial banking system is
108.
Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement
is 20 percent. All figures
are in billions.
Assets
Liabilities & Net Worth
Reserves
$200
Checkable Deposits
$1,000
Securities
300
Stock Shares
400
Loans
500
Property
400
If the Fed increased the reserve requirement from 20 percent to 25 percent, a deficiency of
reserves in the commercial banking system of
would
occur and the monetary multiplier
would fall to .
36–55
109.
Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement
is 20 percent. All figures
are in billions.
Assets
Liabilities & Net Worth
Reserves
$200
Checkable Deposits
$1,000
Securities
300
Stock Shares
400
Loans
500
Property
400
If the Fed reduced the reserve requirement from 20 percent to 16 percent, excess reserves in
the commercial banking system would increase by
and the monetary multiplier would rise to .
110.
Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement
is 20 percent. All figures
are in billions.
Assets
Liabilities & Net Worth
Reserves
$200
Checkable Deposits
$1,000
Securities
300
Stock Shares
400
Loans
500
Property
400
Suppose the Fed wants to increase the money supply by $1,000 billion to drive down
interest rates and stimulate the economy. To accomplish this,
it could lower the reserve
requirement from 20 percent to
111.
Answer the question on the basis of the given consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement
is 20 percent. All figures
are in billions.
Assets
Liabilities & Net Worth
Reserves
$200
Checkable Deposits
$1,000
Securities
300
Stock Shares
400
Loans
500
Property
400
Suppose the Fed wants to reduce the money supply by $200 billion to drive up interest rates
and dampen inflation. To accomplish this, it could
increase the reserve requirement from 20
percent to
112.
The discount rate is the interest
113.
A commercial bank can add to its actual reserves by
114.
The interest rate at which the Federal Reserve Banks lend to commercial banks is
called the
36–58
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written consent of McGraw-Hill Education.
C.
discount rate.
D. federal funds rate.
115.
The discount rate is the rate of interest at which
116.
Projecting that it might temporarily fall short of legally required reserves in the coming
days, the Bank of Beano decides to borrow money from its
regional Federal Reserve Bank.
The interest rate on the loan is called the
117.
When the Fed lends money to a commercial bank, the bank
118.
Suppose that, for every 1-percentage-point decline in the discount rate, commercial
banks collectively borrow an additional $2 billion from
Federal Reserve Banks. Also
assume that the reserve ratio is 10 percent. If the Fed lowers the discount rate from 4.0
percent to 3.5 percent, bank
reserves will
119.
Suppose that, for every 1-percentage-point decline of the discount rate, commercial
banks collectively borrow an additional $2 billion from
Federal Reserve Banks. Also
assume that the reserve ratio is 20 percent. If the Fed increases the discount rate from 4.0
percent to 4.25 percent,
bank reserves will
36–60
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written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 36-03 List and explain the goals and tools of monetary policy.
Test Bank: I
Topic: Tools of Monetary Policy
120.
Which of the following tools of monetary policy is considered the most important on a
day-to-day basis?
121.
Which of the following tools of monetary policy is flexible and able to affect bank
reserves quickly and by relatively specific amounts?
122.
Which of the following tools of monetary policy has not been used since 1992?